Southwestern Energy Company (SWN)

We are focused on providing long-term growth in the net asset
value of our business. In our E&P business, we prepare an economic
analysis for each investment opportunity based upon the expected present value
added for each dollar to be invested, which we refer to as Present Value Index,
or PVI. The PVI of the future expected cash flows for each project is
determined using a 10% discount rate. We target creating at least $1.30 of
discounted pre-tax PVI for each dollar we invest in our E&P projects.
Our actual PVI results are utilized to help determine the allocation of
our future capital investments. The key elements of our business strategy
are:

·

Exploit and Develop Our Position in the Fayetteville Shale.
We seek to maximize the value of our significant acreage position in the
Fayetteville Shale play, which we believe provides us with significant
production and reserve growth potential. We intend to continue to develop
our acreage position and improve our well results through the use of advanced
technologies and detailed technical analysis of our properties.

·

Maximize Efficiency through Economies of Scale.In our key operating areas, the concentration of our properties allows
us to achieve economies of scale that result in lower costs. In our
Fayetteville Shale play, we have achieved significant cost savings by operating
a fleet of drilling rigs designed specifically for the play. We seek to
serve as the operator of the wells in which we have a significant interest.
As the operator, we are better positioned to control the timing and plans
for future enhancement and exploitation efforts, the costs of enhancing,
drilling, completing and producing the wells, and the marketing negotiations for
our gas production to maximize both production volumes and realized price.

Enhancing Our Overall Returns through Expanding Our Midstream
Operations.We seek to maximize profitability by exercising
control over the delivery of natural gas from the areas where we have
production. We seek to achieve this by continuing to improve upon and add
to our gas gathering infrastructure, which we believe allows us to better manage
the physical movement of our production and the costs of our operations. As of
December 31, 2008, we have invested approximately $342.3 million in building a
gas gathering system in the Fayetteville Shale play which was gathering
approximately 802 MMcf per day through 843 miles of gathering lines. We intend
to invest $220 million in our Midstream operations in 2009 to continue the
expansion of our infrastructure. We have also been pro-active in encouraging the
construction of interstate pipelines to provide access to additional markets for
our production. Our marketing subsidiary is a foundation shipper on two
pipeline projects being developed for the Fayetteville Shale play. These
projects will provide access to the eastern United States which will provide new
opportunities for us to maximize the realized price for our production.

·

Grow through New Exploration and Development Activities.
We actively seek to find and develop new oil and gas plays with
significant exploration and exploitation potential, which we refer to as New
Ventures. New Ventures prospects are evaluated based on repeatability,
multi-well potential and land availability as well as other criteria, and can be
located both inside and outside of the United States. Our Fayetteville
Shale play began as a New Venture project in 2002. As of December 31,
2008, we held 138,638 net undeveloped acres in New Ventures projects, which
includes approximately 114,738 net undeveloped acres targeting the Devonian-aged
Marcellus Shale in Pennsylvania. In addition to New Ventures prospects, we also
seek to enter into and develop oil and gas resources through strategic
opportunities to expand existing operations including joint ventures, farm-ins
or farm-outs.

Our BusinessStrategy

align=justify>We are focused on providing long-term growth in the net assetvalue of our business. In our E&P business, we prepare an economicanalysis for each investment opportunity based upon the expected present valueadded for each dollar to be invested, which we refer to as Present Value Index,or PVI. The PVI of the future expected cash flows for each project isdetermined using a 10% discount rate. We target creating at least $1.30 ofdiscounted pre-tax PVI for each dollar we invest in our E&P projects. Our actual PVI results are utilized to help determine the allocation ofour future capital investments. The key elements of our business strategyare:

align=justify>Exploit and Develop Our Position in the Fayetteville Shale. We seek to maximize the value of our significant acreage position in theFayetteville Shale play, which we believe provides us with significantproduction and reserve growth potential. We intend to continue to developour acreage position and improve our well results through the use of advancedtechnologies and detailed technical analysis of our properties.

align=justify>Maximize Efficiency through Economies of Scale.In our key operating areas, the concentration of our properties allowsus to achieve economies of scale that result in lower costs. In ourFayetteville Shale play, we have achieved significant cost savings by operatinga fleet of drilling rigs designed specifically for the play. We seek toserve as the operator of the wells in which we have a significant interest. As the operator, we are better positioned to control the timing and plansfor future enhancement and exploitation efforts, the costs of enhancing,drilling, completing and producing the wells, and the marketing negotiations forour gas production to maximize both production volumes and realized price.

align=justify>Enhancing Our Overall Returns through Expanding Our MidstreamOperations.We seek to maximize profitability by exercisingcontrol over the delivery of natural gas from the areas where we haveproduction. We seek to achieve this by continuing to improve upon and addto our gas gathering infrastructure, which we believe allows us to better managethe physical movement of our production and the costs of our operations. As ofDecember 31, 2008, we have invested approximately $342.3 million in building agas gathering system in the Fayetteville Shale play which was gatheringapproximately 802 MMcf per day through 843 miles of gathering lines. We intendto invest $220 million in our Midstream operations in 2009 to continue theexpansion of our infrastructure. We have also been pro-active in encouraging theconstruction of interstate pipelines to provide access to additional markets forour production. Our marketing subsidiary is a foundation shipper on twopipeline projects being developed for the Fayetteville Shale play. Theseprojects will provide access to the eastern United States which will provide newopportunities for us to maximize the realized price for our production.

align=justify>Grow through New Exploration and Development Activities. We actively seek to find and develop new oil and gas plays withsignificant exploration and exploitation potential, which we refer to as NewVentures. New Ventures prospects are evaluated based on repeatability,multi-well potential and land availability as well as other criteria, and can belocated both inside and outside of the United States. Our FayettevilleShale play began as a New Venture project in 2002. As of December 31,2008, we held 138,638 net undeveloped acres in New Ventures projects, whichincludes approximately 114,738 net undeveloped acres targeting the Devonian-agedMarcellus Shale in Pennsylvania. In addition to New Ventures prospects, we alsoseek to enter into and develop oil and gas resources through strategicopportunities to expand existing operations including joint ventures, farm-insor farm-outs.

We are focused on providing
long-term growth in the net asset value of our business. In our E&P business, we prepare an economic analysis for each investment opportunity based upon the expected present value added for each dollar to be invested, which we refer to as Present Value Index, or PVI. The PVI of the future expected cash flows for each project is determined using a 10% discount rate. We target creating at least $1.30 of discounted pre-tax PVI for each dollar we invest in our E&P projects. Our actual PVI results are utilized to help determine the allocation of our future capital investments. The key elements of our E&P business strategy are:

·

Exploit and Develop Our Existing Asset Base. We seek to maximize the value of our existing asset base by developing properties that have production and reserve growth potential while also controlling per unit production costs. Our primary focus is our Fayetteville Shale play, where we hold approximately 906,700 net acres. We believe our large acreage position holds significant production and reserve growth potential. We intend to continue to develop our acreage position
by accelerating our drilling program
and by improving individual well results through the use of advanced technologies and detailed technical analysis of our properties. Approximately 95% of the $61 million budgeted for seismic and other geological and geophysical, or G&G, expenditures in 2008 will be allocated to our Fayetteville Shale acreage to acquire an additional 370 square miles of three-dimensional (3-D) seismic data. This,

along with approximately 525 square miles of 3-D seismic data that we have acquired through December 31, 2007, will give us seismic data on approximately 45% of our net acreage position in the Fayetteville Shale.

·

Maximize Efficiency through Economies of Scale.In our key operating areas, the concentration of our properties allows us to achieve economies of scale that result in lower costs. In our Fayetteville Shale play, we have achieved significant cost savings by operating a fleet of drilling rigs designed specifically for the play. In addition, we are building a sizeable gas gathering system in the Fayetteville Shale play that will allow us to reduce our per unit production costs.

·

Control Operations and Costs. We seek to serve as the operator of the wells in which we have a significant interest. As the operator, we are better positioned to control the timing and plans for future enhancement and exploitation efforts, the costs of enhancing, drilling, completing and producing the wells, and the marketing negotiations for our gas and oil production to maximize both production volumes and wellhead price.

·

Hedge Production to Stabilize Cash Flow. As of December 31, 2007, the average proved reserves-to-production ratio, or reserve life, of our estimated proved reserves was approximately 12.8 years. Our long-lived reserves provide us with relatively predictable production. We maintain an active natural gas hedging program on our production to protect cash flows that we use for capital investments. As of December 31, 2007, we had hedges in place on approximately 102.0 Bcf of 2008 gas production (representing approximately 70% of our targeted 2008 production) and 79.0 Bcf of 2009 gas production. Additionally, we have financially protected 91.3 Bcf and 3.6 Bcf for 2008 and 2009, respectively, in order to reduce the effects of changes in market differentials on prices we receive on future gas production volumes.

·

Grow Through New Exploration and Development Activities. We actively seek to find and develop new conventional natural gas and oil properties, as well as new unconventional resource plays, with significant exploration and exploitation potential which we refer to as New Ventures. New prospects are evaluated primarily based on repeatability, multi-well potential and land availability as well as other criteria. Our Fayetteville Shale play began as a New Venture project in 2002. As of December 31, 2007, we held 156,465 net undeveloped acres in New Ventures, which includes approximately 88,000 net undeveloped acres targeting the Devonian-aged Marcellus Shale in Appalachia, where we intend to initiate drilling in 2008.

Our Business Strategy

We are focused on providing

long-term growth in the net asset value of our business. In our E&P business, we prepare an economic analysis for each investment opportunity based upon the expected present value added for each dollar to be invested, which we refer to as Present Value Index, or PVI. The PVI of the future expected cash flows for each project is determined using a 10% discount rate. We target creating at least $1.30 of discounted pre-tax PVI for each dollar we invest in our E&P projects. Our actual PVI results are utilized to help determine the allocation of our future capital investments. The key elements of our E&P business strategy are:

·

Exploit and Develop Our Existing Asset Base. We seek to maximize the value of our existing asset base by developing properties that have production and reserve growth potential while also controlling per unit production costs. Our primary focus is our Fayetteville Shale play, where we hold approximately 906,700 net acres. We believe our large acreage position holds significant production and reserve growth potential. We intend to continue to develop our acreage position

by accelerating our drilling program

and by improving individual well results through the use of advanced technologies and detailed technical analysis of our properties. Approximately 95% of the $61 million budgeted for seismic and other geological and geophysical, or G&G, expenditures in 2008 will be allocated to our Fayetteville Shale acreage to acquire an additional 370 square miles of three-dimensional (3-D) seismic data. This,

along with approximately 525 square miles of 3-D seismic data that we have acquired through December 31, 2007, will give us seismic data on approximately 45% of our net acreage position in the Fayetteville Shale.

·

Maximize Efficiency through Economies of Scale.In our key operating areas, the concentration of our properties allows us to achieve economies of scale that result in lower costs. In our Fayetteville Shale play, we have achieved significant cost savings by operating a fleet of drilling rigs designed specifically for the play. In addition, we are building a sizeable gas gathering system in the Fayetteville Shale play that will allow us to reduce our per unit production costs.

·

Control Operations and Costs. We seek to serve as the operator of the wells in which we have a significant interest. As the operator, we are better positioned to control the timing and plans for future enhancement and exploitation efforts, the costs of enhancing, drilling, completing and producing the wells, and the marketing negotiations for our gas and oil production to maximize both production volumes and wellhead price.

·

Hedge Production to Stabilize Cash Flow. As of December 31, 2007, the average proved reserves-to-production ratio, or reserve life, of our estimated proved reserves was approximately 12.8 years. Our long-lived reserves provide us with relatively predictable production. We maintain an active natural gas hedging program on our production to protect cash flows that we use for capital investments. As of December 31, 2007, we had hedges in place on approximately 102.0 Bcf of 2008 gas production (representing approximately 70% of our targeted 2008 production) and 79.0 Bcf of 2009 gas production. Additionally, we have financially protected 91.3 Bcf and 3.6 Bcf for 2008 and 2009, respectively, in order to reduce the effects of changes in market differentials on prices we receive on future gas production volumes.

·

Grow Through New Exploration and Development Activities. We actively seek to find and develop new conventional natural gas and oil properties, as well as new unconventional resource plays, with significant exploration and exploitation potential which we refer to as New Ventures. New prospects are evaluated primarily based on repeatability, multi-well potential and land availability as well as other criteria. Our Fayetteville Shale play began as a New Venture project in 2002. As of December 31, 2007, we held 156,465 net undeveloped acres in New Ventures, which includes approximately 88,000 net undeveloped acres targeting the Devonian-aged Marcellus Shale in Appalachia, where we intend to initiate drilling in 2008.

We are focused on providing long-term growth in the net asset value of our business. Within the E&P segment, we prepare economic analyses for each of our drilling and acquisition opportunities and rank them based upon the expected present value added for each dollar invested, which we refer to as Present Value Index, or PVI. The PVI of the future expected cash flows for each project is determined using a 10% discount rate. We target creating at least $1.30 of discounted pre-tax PVI for each dollar we invest in our E&P projects. Our actual PVI results are utilized to help determine the allocation of our future capital investments. The key elements of our E&P business strategy are:

·

Exploit and Develop Our Existing Asset Base. We seek to maximize the value of our existing asset base by developing properties that have production and reserve growth potential while also controlling per unit production costs. Our primary focus is our Fayetteville Shale play, where we hold approximately 892,000 net acres. Our large acreage position holds significant production and reserve growth potential. We intend to aggressively develop our acreage position by accelerating our drilling program and by improving individual well results through the use of advanced technologies and detailed technical analysis of our properties. In our other operating areas, we intend to

increase our reserves and production by drilling infill locations, expanding known field limits and selectively recompleting existing wells.

·

Grow Through New Exploration and Development Activities. We actively seek to find and develop new conventional natural gas and oil properties with significant exploration and exploitation potential, as well as new unconventional resource plays, which we call New Ventures. New prospects are evaluated based on repeatability, multi-well potential and land availability as well as other criteria. Our Fayetteville Shale play began as a New Venture project in 2002.

·

Maximize Efficiency Through Economies of Scale.In our key operating areas, the concentration of our properties allows us to achieve economies of scale in our drilling and production operations that result in lower costs. Our new drilling company, DDI, has already achieved a level of economies of scale with respect to the drilling of our wells in the Fayetteville Shale play by operating a fleet of rigs designed specifically for the play. DDI has also utilized smaller truck-mounted rigs to drill the vertical portion of the wellbore, decreasing both the number of drilling days and total well costs.

·

Rationalize Our Property Portfolio. We actively pursue opportunities to reduce production costs of our properties and improve overall return, including selling marginal properties from our E&P portfolio of assets and acquiring producing properties and leasehold acreage in the regions in which we operate. We also seek to acquire operational control of properties with significant unrealized exploration and exploitation potential.

We are focused on providing long-term growth in the net asset value of our business, which we achieve in our E&P business through the drillbit. Within the E&P segment, we prepare economic analyses for each of our drilling and acquisition opportunities and rank them based upon the expected present value added for each dollar invested, which we refer to as PVI. The PVI of the future expected cash flows for each project is determined using a 10% discount rate. We target creating at least $1.30 of discounted pre-tax PVI for each dollar we invest in our E&P projects. Our actual PVI results are utilized to help determine the allocation of our future capital investments. The key elements of our E&P business strategy are:

·

Exploit and Develop Existing Asset Base. We seek to maximize the value of our existing asset base by developing and exploiting properties that have production and reserve growth potential while also controlling per unit production costs. We intend to add proved reserves and increase production through the use of advanced technologies, including detailed technical analysis of our properties, and by drilling infill locations and selectively recompleting existing wells. We also plan to drill step-out wells to expand known field limits.

·

Grow Through New Exploration and Development Activities. We actively seek to develop natural gas and oil plays as well as New Ventures. New prospects are evaluated based on repeatability, multi-well potential and land availability as well as other criteria. Our Fayetteville Shale play is an outgrowth of our focus on new exploration and development projects.

·

Rationalize Our Property Portfolio and Acquire Selective Properties. We actively pursue opportunities to reduce production costs of our properties and improve overall return, including selling marginal properties from our E&P portfolio of assets and acquiring producing properties and leasehold acreage in the regions in which we operate. We also seek to acquire operational control of properties with significant unrealized exploration and exploitation potential.

·

Maximize Efficiency Through Economies of Scale.In our key operating areas, the concentration of our properties allows us to achieve economies of scale in our drilling and production operations that result in lower costs. In addition, we expect DDI to achieve economies of scale with respect to the drilling of our wells in the Fayetteville Shale play.